The Pension Fund Operators Association of Nigeria (PenOp) has reported a significant decline in investment in real estate, largely due to the limited availability of real estate investment trusts (REITs) in the market.
In an analysis of the past five years’ investments by pension fund administrators (PFAs) in REITs and real estate, PenOp shared that the total investment in REITs fell drastically from N239.28 billion in 2020 to just N20.06 billion by the end of 2024. The analysis indicated that 2022 saw the sharpest decline, with REIT investments dropping to N14.14 billion from N153.52 billion in 2021. There was a slight recovery in 2023, bringing investments back to N21.04 billion, but it dropped again in 2024.
PenOp attributed this decline to the lack of available REITs, explaining that active funds have shifted to real estate investments through private equity funds. However, closed pension funds have continued to invest directly in real estate, with N273.06 billion invested in 2024, up from N245.34 billion in 2023.
This represents a substantial increase from 2019 when real estate investment stood at just N5.13 billion. The total combined investment by PFAs in the real estate sector, through both REITs and direct investments, reached N293.12 billion in 2024, marking a 10.04% rise compared to 2023.PenOp emphasized that real estate remains a vital asset class for pension funds, helping to protect against long-term inflation and providing developers with a consistent source of long-term capital.
Pension funds in Nigeria traditionally invest in real estate either through direct investments or via REITs. While active pension funds are restricted from direct real estate investments, they are permitted to invest in REITs. Only closed pension fund administrators and those managing defined benefit schemes are allowed to make direct real estate investments, as per guidelines issued by the National Pension Commission in September 2011.
The three main REITs currently listed on the Nigerian Exchange (NGX) are SFS Real Estate Investment Trust, priced at N179.45 per unit; UH Real Estate Investment Trust at N36.60 each; and UPDC Real Estate Investment Trust, which has the largest market capitalization at N15.21 billion, with units priced at N5.70 each.
